The country’s inflation target for this year is no more than 7%. But it seems to be an extremely difficult mission to accomplish. A report by the General Statistics Office puts the February consumer price index (CPI) at 2.09%, which takes to 3.87% the January-February CPI. In just two months, price rises already account for more than half the goal set for the entire year.

The prices of almost everything ranging from foods to electricity and fuels have climbed the ladder. And there are no signs that the problem will stop there as these items have a broad impact on every aspect of life. After each bout of upward price changes, salaried people found themselves worse off given their unchanged wages.

Local media are quick to have taken issue with this and called for the Government to rethink the personal income tax (PIT) law in which key provisions are deemed as inappropriate now. Obviously, the matter has made big headlines in the media.

Taxpayers, economic experts and even lawmakers have joined the chorus to urge the Government to swiftly do something to help personal taxpayers ease the heavier tax burden.

The law was introduced in 2009, turning around seven million people of the country’s 86 million population into taxpayers. Any incomes beyond the tax-free VND4 million/month threshold and a VND1.6 million deduction for each dependent of the taxpayer are taxed. At the time, that was not a big issue. But when taking into account the sharp price rises over the past few years, the above numbers can no longer stand.

A Hanoi resident identified as Phuong by the online paper VnExpress.net says the tax-free deductions have become petty in reality. “The monthly cost of bringing up a child is actually far beyond the VND1.6 million. When adopting this law, lawmakers must not have made the case for illnesses and inflation,” she says.

She says that with a monthly wage of VND4 million she does not pay the tax but her husband does. His salary is VND12 million. “Previously, my husband’s wage was higher than many other people but has now turned out to be low due to soaring consumer prices. We have almost no savings for our plan to have a second child next year,” Phuong laments.

There are many taxpayers like Phuong’s life partner out there. With the shrinkage of incomes triggered by jumping prices, they have found life harder. Meanwhile, pay raise prospects in near future are slim as their employers have also got bogged down in a struggling economy.

An article published early this week on Tuanvietnam.vn, a site operated by the online newspaper Vietnamnet.vn, says prices have rocketed by around 50% over the past four years. “The tax-free threshold of VND4 million has rapidly become obsolete.”

Hanoi resident Phuong says on VnExpress.net that her family is weighing moving their only son from a private school to a public one to cope with the mounting price pressure. “This is a real tough decision to be made by parents but we have no other choice.”

Feeling sympathy for the individual taxpayer, Nguyen Minh Phong, head of the Economic Research Department of the Hanoi Institute for Economics and Social Development and Research, says in Tuoi Tre newspaper that it is time to revamp the PIT law.

Lawmakers are also feeling the urge to revise the law to help ease the tax burden.

Dinh Van Nha, vice chairman of the National Assembly Financial and Budgetary Committee, is quoted by Thanh Nien newspaper as saying late last week that there is no need to wait until inflation has bitten; if the law has exposed shortcomings, it should be swiftly amended.

The 12th-tenure legislature will convene its final session from March 21 to 29, so the Government will find it hard to complete draft revisions to the law in time, Nha says. The 13th-term lawmaking body is scheduled to meet for the first time in July, so there will be ample time for preparation.   

The vice chairman of the National Assembly, Nguyen Duc Kien, has given the green light to a fast-track law revamp, saying, “The National Assembly will hit the ground running when the Government proposes (revisions).”

On the part of the Government, some initial actions have for the first time been taken in response to the popular request for the PIT law improvement though there have been views that any PIT law changes would benefit the rich rather than the poor. 

VnExpress.net reported on Thursday that the Ministry of Finance had assigned the General Department of Taxation to preside over a team in charge of proposing revisions to the law. The ministry is in the process of asking for further consultations from other ministries, the public and the media before multiple revamp plans are worked out.

How the law will be revised remains to be seen, but there have appeared proposals that when it comes to the tax-free deductions, setting out specific amounts should be avoided to ensure the law will be shielded from impacts of future price increases. Dinh Xuan Thao, head of the Legislative Research Institute of the National Assembly, says in Tuoi Tre that the tax-free deductions should be based on the minimum wages that can be adjusted according to inflation.

Nguyen Minh Phong of the Economic Research Department says, “The goal (of the amendment) should be not only to impose a tax that is not too high for the people to bear, but to leave an encouraging impact (on society) in current conditions.”

Source: Saigon Times.